Chinese domestic firms suffer innovation decline due to foreign investment presence.
The article examines whether foreign investment in China boosts the productivity of local companies. After analyzing data from a World Bank survey, the researchers found mixed results on this topic. Despite testing over 2500 scenarios, they did not find consistent evidence of positive productivity spillovers from foreign investment. However, they did discover that Chinese private firms tend to invest less in innovation when foreign investment is present. This suggests that domestic companies may have a more passive role in the global economy than previously thought.